Inspector general says rural multiple-ownership deal OK

In a recent advisory opinion, the HHS’ inspector general’s office has blessed a proposed arrangement involving 23 physicians and podiatrists who own and operate a group practice while maintaining practices outside the group as well. In addition to passing the office’s antikickback inspection, the practice passed a CMS test in June last year on compliance with rules against self-referral.

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Although the providers maintain their own separate practices, they also operate as a group in a central location where they provide medical care, consultation, and walk-in urgent care, as well as laboratory and diagnostic radiology services, according to the opinion. The practice, whose name and location were not given, is organized as a limited liability company with a central governing board and a single accounting system that pools revenues and expenses.

The opinion includes much discussion about an investing partner with a 1% equity stake who is also a physician but practices in another state and only provides administrative services for the group. According to Eric Gordon, a Los Angeles-based lawyer and physician who heads the California health law practice for the firm of McDermott Will & Emery, the issues involved with this one investor were not as important as one might be led to believe.

Gordon said the CMS blessed the arrangement because of the practice’s rural location, “But the rural exception wasn’t going to win the day with the OIG.” Instead, he explained that this practice had to show its compliance with the definition of a group practice to win the inspector general’s seal of approval—which it did, with the slight exception of the one physician investor who wasn’t providing medical services.

“The OIG is saying here that you need to be foursquare within the group practice definition—or very close to it—for us to bless this type of arrangement,” Gordon said. “They’re saying ‘We mean it, to be protected you need to qualify as a group practice.’ ”

He added that, regarding this opinion, “There’s more to it reading between the lines than by reading the lines themselves.”

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